This week from CEPR: October 21

Thursday, October 21, 2021

Highlights from some of the latest research reports published in the Centre for Economic Po

licy Research (CEPR) network’s long-running series of discussion papers, as well as some other recent CEPR publications.

Also, links to some of the latest columns on Vox, the Centre’s policy portal, which provides ‘research-based policy analysis and commentary from leading economists’.

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    • New Discussion Papers


    TELEMIGRATION AND DEVELOPMENT: On the offshorability of teleworkable jobs
    Richard Baldwin and Jonathan Dingel 
    CEPR Discussion Paper No. 16641 | October 2021 

    The Covid‐19 pandemic has introduced huge numbers of employers and employees to remote work. As the economy returns to normal, employers are likely to re‐evaluate the kinds and numbers of workers that they employ. It seems inevitable that some of the tasks that can be done remotely will be done by telemigrants rather than domestic workers. There is a fear that digitally enabled telemigration will be asymmetric: It will expose tens of millions of office workers based in rich nations to foreign competition without providing them additional, offsetting export opportunities. Is this anxiety well‐founded? New research suggests that it is not.

    A new CEPR paper by Richard Baldwin and Jonathan Dingel attempts to think about how we might evaluate the size of the increased offshoring of office and professional jobs from high‐wage to low‐wage nations. The starting point is to recognise that many jobs that can be performed remotely require soft skills (language, educational attainment, cultural familiarity) that make domestic and foreign workers imperfect substitutes. The equilibrium number of telemigrants, therefore, depends on the number of potential foreign suppliers of these tasks and the bilateral frictions that impede trade in these services.

    The results yield a clear message: the number of offshored jobs is unlikely to be transformative when it comes to the development paths of most emerging economies. First, the current baseline of trade in Other Business Services is very small. The authors show that multiplying these flows by a factor of two or three would not translate to many jobs in emerging markets. Second, quantitative trade models that assume constant elasticities cannot generate very large responses to modest declines in trade costs. There are no “tipping points” in canonical structural gravity models. 

    The research does show that small changes in trade costs could generate large and asymmetric increases in the exports of service tasks from low-wage nations. It also shows that emerging markets have tremendous potential to export services that is not evident in the current pattern of trade flows.

    Figure: Importance of English language for teleworkable versus non-teleworkable jobs

    Source: Authors’ elaboration of O*NET data.


    Daniel Waldenström
    CEPR Discussion Paper No. 16631 | October 2021

    A new CEPR paper by Daniel Waldenström analyses new evidence on long-run trends in aggregate wealth accumulation and wealth inequality in Western countries. Among the findings:  

    • Wealth-income ratios were lower before World War I than previously claimed. 
    • Wealth concentration fell until the 1970s after which it has remained low in Europe but increased in the United States.
    • The structure of private wealth has changed over the twentieth century, from being dominated by elite fortunes in agriculture or businesses to consisting mainly of widely dispersed assets in housing and funded pensions.
    • Capital shares in national income have been relatively stable over time, especially in the postwar era. 

    These findings cast doubt on claims that a low-tax, low-regulation capitalism will generate extreme capital accumulation, and that persistent wealth equalisation requires large shocks to capital coming from wars or progressive taxation. Instead, institutions that promote household wealth accumulation from below appear to be key for understanding the long-run evolution of wealth in Western societies.

    Figure: Wealth-income ratios in history: ”Europe” vs United States

    • A MOUNTAIN OF DEBT: Navigating the Legacy of the Pandemic     

    A MOUNTAIN OF DEBT: Navigating the Legacy of the Pandemic
    Ayhan Kose, Franziska Ohnsorge, Naotaka Sugawara 
    CEPR Discussion Paper No. 16637 | October 2021

    The COVID-19 pandemic has triggered a massive increase in global debt levels and exacerbated the trade-offs between the benefits and costs of accumulating government debt. A new CEPR study by Ayhan Kose, Franziska Ohnsorge and Naotaka Sugawara examines these trade-offs by putting the recent debt boom into a historical context. It reports three major findings. 

    1. First, during the 2020 global recession, both global government and private debt levels rose to record highs, and at their fastest single-year pace, in five decades. 
    2. Second, the debt-financed, massive fiscal support programs implemented during the pandemic supported activity and illustrated the benefits of accumulating debt. However, as the recovery gains traction, the balance of benefits and costs of debt accumulation could increasingly tilt toward costs. 
    3. Third, more than two-thirds of emerging market and developing economies are currently in government debt booms. On average, the current booms have already lasted three years longer, and are accompanied by a considerably larger fiscal deterioration, than earlier booms. About half of the earlier debt booms were associated with financial crises in emerging market and developing economies.

    NATURAL EXPERIMENTS IN LABOUR ECONOMICS AND BEYOND: The 2021 Nobel laureates David Card, Joshua Angrist, and Guido Imbens

    Jörn-Steffen Pischke            
    16 October 2021

    The 2021 Nobel Prize in Economic Sciences has been awarded to David Card of the University of California, Berkeley, “for his empirical contributions to labour economics”, and to Joshua Angrist of MIT and Guido Imbens of Stanford University “for their methodological contributions to the analysis of causal relationships”. 

    Writing at Vox, Jörn-Steffen Pischke explains how the use of natural experiments in empirical economics has ushered in much progress in the analysis of causal relationships. The ensuing ‘credibility revolution’ over the past three decades has been transformational for the study of key policy challenges, including education, immigration and the minimum wage.



    Jan Eeckhout, Christoph Hedtrich, Roberto Pinheiro              
    16 October 2021

    A study by Jan Eeckhout, Christoph Hedtrich and Roberto Pinheiro uses data on over 200,000 firms in the United States from 1990 to 2015 to show that the labour savings from information technology (IT) are largest in big cities and metropolitan areas, where wages are higher, so urban firms have the biggest incentives to invest in these technologies. This in turn leads to the polarisation of occupations across geography and accounts for the rise in wage inequality within cities. 

    ARE REFEREES INFLUENCED BY THE CROWD? Evidence from the German Bundesliga

    Alma Cohen, Zvika Neeman, Florian Auferoth                                    
    17 October 2021

    To what extent does crowd pressure affects referees’ decisions in football? Using evidence from the Bundesliga, Germany’s top division, a study by Alma Cohen, Zvika Neeman and Florian Auferoth uses the newly introduced video technology (VAR), as well as the absence of crowds during the Covid-19 pandemic, to show that that is no bias in awarding goals or penalties, but a tendency for bias towards the home team when deciding whether or not to issue a yellow card, which disappears in the absence of a crowd. 


    Raphaël Parchet, Frédéric Robert-Nicoud                    

    15 October 2021

    A study by Raphaël Parchet and Frédéric Robert-Nicoud study the consequences of the development of a major transportation infrastructure over a long period – the development of the Swiss highway network from 1960 to 2010. Among the findings: 

    • The development of the Swiss highway network from 1960 to 2010 influenced the residential and job compositions of municipalities. 
    • The advent of an entrance/exit ramp within 10 km of a municipality caused a long-term 24% increase in the share of top-income taxpayers. 
    • The welfare gains of residents of connected municipalities relative to residents in non-connected municipalities range from only 2% for the low-income group to 12% for the top-income group. 
    • Highways also contributed to job and residential urban sprawl.


    Willem Thorbecke                                       
    15 October 2021

    During the COVID-19 pandemic many countries experienced difficulty obtaining the semiconductors that are vital for smartphones, computers, cars, artificial intelligence, cybersecurity, and many other applications. An economy without access to semiconductors would seize up and a military without access would be vulnerable.

    Writing at Vox, Willem Thorbecke explains how Asia gained comparative advantage in this sector and identifies key lessons for countries seeking to promote domestic semiconductor manufacturing, including:

    1. government largesse matters less than facing competition
    2. entrepreneurs are essential 
    3. industrial policy functions better when the polity unites to confront a threat
    4. education and technology transfer are vital
    5. protectionism can be counter-productive.


    Michael Bordo                                  
    19 October 2021


    Monetary transformations through history have been driven by changing technology, changing tastes, economic growth, and the demands to effectively satisfy the functions of money. Writing at Vox, Michael Bordo argues that technological change in money and finance is inevitable, driven by the financial incentives of a market economy, and identifies four key lessons central banks could learn from history to enable them to provide digital currency to effectively fulfil their public mandates. 


    Mario Monti 19 October

    In a video recorded in 2017, Mario Monti looks back at the challenges posed by the Global Crisis, 10 years earlier, and asks how well prepared for the next crisis the world is.

    Post-Covid, his words regarding growing differences in ideological viewpoints between the EU and the US, as well as the possible effects on the unity of any EU response likely to be posed by Brexit seem prophetic.


    Maurice Obstfeld interviewed by Tim Phillips, 15 October 2021

    Even after their role in the global financial crisis, globalised, minimally regulated financial markets are still regarded as inevitable and, on balance, good for us. Maurice Obstfeld of Berkeley tells Tim Phillips about the short but action-packed history of financial globalisation and asks whether we should be rethinking this aspect of capitalism too.

    Read more about the research presented and download the free discussion paper:
    Obstfeld, M. 2021. 'The Global Capital Market Reconsidered'. CEPR